Why Do Nine Blockbuster Locations Still Exist In Alaska?

The state of Alaska has its share of picturesque panoramas and landmarks that visitors can’t resist when it comes to snapping photos.

The majesty of Denali and the Alaska Range. Moose, brown bears, gray wolves, and other indigenous wildlife wandering about Katmai National Park and Preserve. Blockbuster video stores.

“Tourists that come up [to Alaska], some of them stop in the stores and take pictures,” shares Alan Payne, the president of Texas-based Border Entertainment, which owns Alaska’s nine remaining Blockbusters, as well as 10 stores in Texas. “The store managers get a kick out of them.”

A sighting of one of the few lingering Blockbuster stores around the country still tickles the nostalgia bone of anyone who misses the days of late fees and khaki-clad employees if social media and online forums are any indication. The topic of the abundance (relatively speaking) of Blockbuster stores in Alaska came up in the comments thread of a recent Ask Reddit community post.

But why—as people are continually streaming videos on their phones and laptops—is Alaska still a hot bed for the former video rental chain that practically symbolized home entertainment in the ’90s?

The bottom line is that the business still has a lucrative bottom line there, according to Payne.

“[DVD and Blu-ray rentals are] still a big business. I haven’t looked at the most recent numbers, but I think Redbox is still [making] $3 or $4 billion a year or something like that. And it doesn’t get talked about very much, but Netflix still has a huge by-mail business. … There are still a huge number of people that use it. …

“The stores up there are big, and if someone was to see them on a Friday or Saturday night they’d be shocked to see how many people are in them. They’re still pretty good stores.”

Internet access and the data demands of watching TV shows and movies on a streaming platform such as Netflix are part of what makes DVD rentals such a lucrative business model in the state.

“Most people in Alaska—especially in Anchorage where most people live—they have access to internet service just as good as ours, but it’s not unlimited. It’s charged on data usage,” Payne tells Upvoted. He says that he visits the Alaska stores about two or three times a year.

“For that reason, a lot of binge watching on Netflix and other sites has just not grown as fast up there as it has down there,” he says.

“What we and most of the remaining franchisees worked out with [Dish] was a licensing agreement,” Payne says. “So we’re paying them for the use of the name only, and obviously, there’s no support from Blockbuster anymore.”

In some ways, the lack of support is probably addition by subtraction for Payne’s business. He attributes some of his success in Alaska to the way Border Entertainment operated the outlets, which was different than the national chain’s home office.

“We just felt we had a better business model than Blockbuster corporate did,” Payne says. “Franchisees set their own pricing, manage their own inventories. It was a pretty loose arrangement. We did things much, much differently.”

That strategy didn’t always translate, though, in other markets. Although Border runs more outlets in Texas than Alaska, the Lone Star State market has not been as profitable as its northern counterpart, despite having the same management philosophy behind the operation of those stores.

“Texas had its day. It’s declined more rapidly than Alaska …,” Payne says. “Some of the stores in Alaska were our highest volume stores in the entire country for many years. Texas stores never got into that range. When things got declining, we had less margin for error, and we closed more stores down here than we did there.”

Payne realizes Texas’ decline is more indicative of the current state of the DVD rental industry than Alaska’s continued profitability. He knows the window is continuing to close on this area of business, but he doesn’t have any plans to abandon it yet.

“I’m not naive enough to think that the business is not severely challenged …,” Payne explains, adding that the DVD rental market is less than half the size it was at its peak. “Anybody opening a video store right now would have to have their head examined. … It’s very much like the music business. The CD business is way off. A lot of it has been replaced by people buying through iTunes and whatnot, but not all of it. So the whole pie has shrunk some, and it’s the same way in the home video business. “

“I’m not sure what I’ll do—or if I’ll do anything—after it’s all over,” he adds. “But it still keeps me plenty busy. Particularly since we’ve shrunk our support staff down. I do a lot things now that I wasn’t doing five years ago.”